UNBLF - Unibail-Rodamco-Westfield: Recent Outperformance Has Frontloaded Gains (Rating Downgrade)

2024-05-07 11:19:34 ET

Summary

• Unibail-Rodamco-Westfield has significantly outperformed European and global real estate ETFs so far in 2024.
• From an operational perspective, the company saw an excellent start to 2024, with occupancy, tenant sales, and footfall all improving.
• Smart hedging has kept the cost of interest at just 1.8%, but with an average debt maturity of 7.8 years, refinancing is inevitable.
• Despite recent disposals, net debt still accounts for 66% of enterprise value, with the EPRA LTV of 54.4% elevated as well.
• I am neutral on the shares as the market cap rate of about 5.55% is unattractive, despite interest rate hedging and operating momentum.

Introduction

I previously covered Unibail-Rodamco-Westfield ( OTCPK:UNBLF ) in January 2024 arguing the company's share price would benefit from lower ECB interest rates. So far in 2024, the stock is up close to 20%, significantly outperforming the iShares STOXX Europe 600 Real Estate UCITS ETF which is down in the low single digits. Furthermore, Unibail-Rodamco-Westfield, or URW for short, has significantly outperformed the Vanguard Global ex-U.S. Real Estate Index Fund ETF ( VNQI ) in 2024:

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